The US Dollar (USD) has been steadily making gains against other major currencies and the most interesting thing is that the USD/NZD rate is one of the most vulnerable areas of the Forex.
This is because of the large and sustained sell off in the AUD/USD and the NZD/USD.
As a result, many investors, both domestic and foreign, are putting a great deal of attention on the USD/NZD rate. This is because the rate is a key support and resistance area and it has been given the nickname “renaissance of the dollar”.
Traders who trade Forex currency often look for these support and resistance levels. In the past, these support and resistance lines have been referred to as support and resistance areas. Generally, a “strong” support or resistance line is one that has existed for many years and has not yet reached a new top.
A “weak” support or resistance area is one that has only recently reached its top. If you notice, the area between these two lines has been named the renaissance of the dollar and this is because the currency pairs of the past have lost a lot of their value while the currency pairs of the present have not yet recovered.
As we can see, the strength of the support and resistance lines in this area (between the yen and the dollar and the euro and the dollar) are based on factors such as price action and technical indicators. Prices alone do not indicate that these support and resistance levels are strong or weak.
A trend line drawn on the chart, however, can provide an indication of the strength of the previous strong support and resistance lines. The strong support or resistance line found here is known as the “renaissance of the dollar”. You may ask why the name “renaissance” as it could be a signal of a bearish market, since the strong support level has been present for many years now.
Well, it is interesting to note that the strong support line is normally a line that has been around for some time. Therefore, traders should not be surprised if the rate rises along with the strengthening of the currency pair. The greater the strength of the support and resistance line, the stronger the currency pair will be and the higher the NZD/USD and AUD/USD rates will reach.
The rise of the rate does not necessarily mean that the currencies are headed down. It may simply mean that the support and resistance levels are weakening or that the pair of currencies has reached a new upper limit.
If you follow the history of currency pairs, the NZD/USD and AUD/USD rates have always topped at high points of strength. These highs of strength are generally reached right before the strongest US dollar support or resistance levels.
You may ask what would happen if the USD weakens and the NZD/USD falls below the strength level of the strong support line and the AUD/USD loses most of its strength. We believe that this would lead to a sharp appreciation of the AUD/USD and also a drop in the NZD/USD rate.
This is why traders like to find areas of weakness in the support and resistance lines as well as also areas of strength where the NZD/USD rate can be expected to rise. If the pair of currencies remains strong, this is when you should be trading.
When the pair of currencies is weak, you may want to wait a short time period before you buy, as there is a risk that the trend line found at the top of the chart may weaken. and the pair may move lower as the strength of the support or resistance line fades.